New duty structure likely in budget to boost manufacturing sector

The government in the forth-coming Budget is expected to address the inverted duty structure, under which complete goods are taxed from lower rates than the raw material, so as to boost the manufacturing sector.

The Commerce along with Industry Ministry in its pre-budget referrals will ask the Finance Minister to take out this anomaly mainly because it is impacting domestic manufacturers adversely, sources said.

"The ministry has already started consultations to face the matter as it will help in boosting the manufacturing sector near your vicinity, " said any source.

Inverted duty framework impacts the domestic industry adversely to be a manufacturers have to pay for a higher price tag for raw material with regard to duty, while the finished product lands at lower responsibility and costs minimal.

Even more, concessions given simply by India under free trade agreements (FTAs) to be able to its partner countries has additionally resulted in inverted duty structure which makes Indian manufactured goods (those dependent on imported raw materials) uncompetitive in domestic market.

Indian has implemented FTAs having countries including Okazaki, japan, South Korea and Singapore and are also in discussion with a few more nations.

An industry skilled said that imported raw material users in a range of manufacturing industry segments come in a spot due to inverted customs duty structure which makes them uncompetitive versus cheaper finished merchandise imports and discourages domestic value supplement.

Citing an example on the tyre industry, Ficci had mentioned that inverted duty structure on this sector exists with respect to natural rubber which is the principal fresh material for creation. Basic customs responsibility on tyres is actually 10 per cent as compared to 20 per penny or Rs 20/kg (which ever before is lower) on natural rubber.

Finance Minister Arun Jaitley is expected to present the Provide 2014-15 in Come july 1st.

Manufacturing, which constitutes over 75 per cent of the directory, declined 1. 2 per cent in March versus growth of some. 3 per cent a year earlier.

During the April-March period of 2013-14, the sector's productivity contracted 0. 8 per cent compared with 1. 3 per cent growth previously.